How we helped Zara make the most of her inheritance
When we first met Zara she was in her early 50s. Her mother had recently died, leaving her £500,000, but she didn’t want to touch the money immediately; her main focus was to ensure she could pass it on to her children and any future grandchildren.
10 Apr 2025
|Making it possible to maximise a lump sum investment
If you come into a sum of money unexpectedly, we can help you use it as tax-efficiently as possible, whether it’s to provide income, help your children, or create a pension pot. We can show you the most effective and straightforward way to achieve your aims.
Getting to know Zara
Zara worked part time, earning £12,000 per year as a peripatetic music teacher, while her husband Afham worked in the oil industry, bringing in an annual income of £80,000. This created a joint income of £92,000, on which the two of them could live comfortably.
Their daughter Nadia had just started working in the Civil Service and son Malik was studying law at Exeter. As well as a bit of help from the bank of Mum and Dad, they had both taken student loans, but were happy with the amounts and their ability to repay them in the long term.
Why Zara needed our help
Zara wanted to invest the inheritance and use the income to help pay off her children’s student loans and any other expenses they might run up. Other than that, she wanted to ensure the sum outpaced inflation and could be a rainy-day fund for the family.
For the first time, Zara had to consider inheritance tax (IHT). This had never been an issue before, but now she had her mother’s legacy and the matrimonial home, as well as some other savings. Without efficient tax planning her children, as her beneficiaries, might have to pay IHT in the future.
Our Canaccord Wealth solution
We showed Zara how she could best meet her objectives and started by recommending the most tax-efficient ways for her to manage her funds.
First, we set up a Self-Invested Personal Pension (SIPP) to help Zara increase her pension contribution. As she only worked part-time, she could put 100% of her £12,000 income into the SIPP. Under current pension rules, Zara’s SIPP is completely outside her estate for IHT purposes and also sheltered from income tax and capital gains tax (CGT), so it is a very tax-efficient solution.
We also set up an ISA to which she could add the maximum amount each year (according to each respective year’s allowance), again protecting her investments from potential income tax and CGT.
We then placed the remaining money in an investment portfolio for Zara. Over time, we are gradually moving funds from this portfolio into her ISA to ensure tax-efficiency
What happened next
This strategy has worked successfully for Zara. She has now accumulated over £100,000 in both her SIPP and ISA, and her portfolio is positioned well for current market conditions. Afham has also planned his retirement. He has just had his retirement leaving party and, following our review of his pension arrangements, we consolidated his pension funds so he is now set up for the future.
Keeping in touch
We meet both Zara and Afham regularly to review their investments, pensions and IHT planning. Malik has recently graduated, and we are expecting a meeting soon to discuss moving some money around to help both children pay off their student loans and start on the property ladder.
